By David Cay Johnston
The opinions expressed are his own.

Last year a fourth of the nation’s oil pipelines earned excessive profits, at up to seven times the rates allowed these regulated monopolies, according to an explosive analysis prepared by a former general counsel for the U.S. Federal Energy Regulatory Commission.

R. Gordon Gooch, the former counsel, alleges in his Oct. 3 study, for instance, that Sunoco’s Mid-Valley Pipeline, which carries crude oil from Texas to Michigan, earned a 55 percent return on assets. That is seven times its authorized profit margin, based on a calculation derived from an accounting report the company filed with FERC.

Three other regulated monopoly pipelines earned more than 40 percent on their assets, while another three earned more than 30 percent, an examination of their FERC filings by Reuters shows.

To put that level of profitability into context, overall nonfinancial businesses earned a 6.7 percent after-tax profit on their assets last year, the latest Bureau of Economic Affairs report shows.

In a competitive market, profits are unlimited except for the discipline of competition. Because there is no market to discipline monopolies, Congress created FERC, which sets prices, known as rates, for pipelines and some other energy monopolies.